* U.S. surprise fuel builds overshadows crude stock draw
Iraq to restore Kirkuk oil production by Sunday
* Chevron suspends drilling activity in Kurdistan
* OPEC expected to extend supply cuts through next year
* U.S. production down 11 percent at 8.4 mln bpd (Adds fresh prices, Chevron suspending drilling in Kurdistan)
By Bryan Sims
HOUSTON, Oct 19 (Reuters) - Oil prices fell more than 1 percent on Thursday, pressured by larger-than-expected product inventories in the United States, and some profit-taking after a recent run-up in oil benchmarks.
Ongoing tension in the Middle East has been supportive, however, as reduced flows from the Iraqi Kurdish pipeline through Turkey have raised worries about supply.
Brent crude was down 94 cents, or 1.6 percent, at $57.22 a barrel by 1:53 p.m. EDT (1753 GMT). The global benchmark is still about 30 percent above its mid-year levels. U.S. light crude fell 68 cents, or 1.3 percent, to $51.36, but is still almost 25 percent higher than June's lows.
Analysts said they have seen some profit-taking after two weeks of gains as upward momentum in prices appears to be waning. Energy equities were also weaker, falling to three-and-a-half week lows.
"There seems to be a macro selloff across the board with energy stocks also coming down," said John Kilduff, partner at Again Capital LLC.
The oil market turned softer on Wednesday after the U.S. Energy Information Administration reported a surprise drop in U.S. refining rates and an unexpected build in fuel stocks last week that signaled slower demand in the world's top oil consumer.
The fuel build overshadowed a 5.7 million-barrel slump in U.S. crude inventories <C-STK-T-EIA> and an 11-percent tumble in crude output last week to 8.4 million barrels per day (bpd), its lowest since June 2014, as production was shut in by Hurricane Nate.
Instability in the Middle East is increasing risks to supply from key oil-producing areas.
"Anything that happens in the Middle East seems to put a little premium on oil prices," said Ryan Kelbrants, energy market analyst at CHS Hedging LLC in Inver Grove Heights, Minnesota.
Iraqi Kurdistan's oil exports have been more than halved since Wednesday after the Iraqi military retook some of the biggest fields from Kurdistan's Peshmerga forces, following a Kurdish independence referendum last month that was condemned by Baghdad. Both Kurdish and Iraqi sources cited technical glitches in the Kirkuk area.
Iraq said it expects to restore Kirkuk's oil production to last week's levels by Sunday.
Meanwhile, Chevron Corp said it has temporarily suspended oil and gas drilling activity in Iraqi Kurdistan.
U.S. President Donald Trump last week refused to certify Iran's compliance with a nuclear deal, leaving Congress 60 days to decide further action against Tehran. That could imply the resumption of sanctions against Iran, which reduced supply by about 1 million bpd during the previous round.
However, it is unlikely the United States will get the same level of cooperation from other countries as it did when it previously sanctioned Iran.
Analysts say crude supply should keep tightening if the Organization of the Petroleum Exporting Countries and partners, including Russia, agree an expected extension to their deal to curb production.
(Additional reporting by Christopher Johnson in London and Henning Gloystein in Singapore; Editing by Alistair Bell and Marguerita Choy)